22
Apr

Wednesday – Oil Inventory Preview Plus

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 Happy Earth Day! Do the right thing and buy one of these.

 

In Today's Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today
  5. Earnings Watch
  6. Odds & Ends

Holdings Watch: No changes yesterday.

 

Commodity Watch

The June crude oil contract rose $0.04 to close at $48.55 yesterday. Crude cotinues to look like buy on weaknessin the mid to up $40s and sell on lack of conviction below $55 with a chance that we get back to $60 on a chart in the medium term with higher prices by year end as the combination of economic improvement, OPEC cuts, and Non-OPEC supply compression results in significant inventory reductions. The 12 month strip is now trading at $54.50 and with service costs falling this level takes on a more optimistic shade of green for producers.  This morning crude is trading up slightly after API data showed an unexpected draw on crude oil stocks as the refining sector apparently shook itself back to life.

  • Mexico Watch: Production for March fell 6% from year ago levels to 2.7 mm bopd. Mexico is also keeping more oil at home with imports falling from 1.6 mm bopd last year to 1.2 mm bopd this past March.
  • KOG Comment Watch - The tiny Bakken hopeful made an interesting comment about a recent contraction in the differential to Nymex from the Bakken, a contraction from the high teens to the $7 to $9 range, making Bakken economics considerably more attractive.

Natural gas fell $0.03 to close at $3.51 yesterday, recovering the $3.50 mark after an early morning plunge below it tied to early crude weakness. This morning gas is trading flat.

Oil Inventory Preview

ZComment:

API  Inventories: (exactly the opposite of expectations but note that the end points lay down pretty closely to where storage would be if the survey numbers for this week's EIA report were accurate)

  • Crude: DOWN 1 million barrels to 370 million barrels
    • Imports: up 1.814 mm bopd
    • Refinery runs:  up 465 mm bopd as utilization rose 2%
  • Gasoline:  Up 107,000 barrels to 218 million barrels
  • Distillates: Up 485,000 barrels to 142 million barrels
  • A draw today would be the first in 7 weeks for total U.S. crude stocks, may not be a trend but would be a welcome respite to the rapid incline in inventories of late.
  • I've been looking for the refiners to get back to business and the API's report would seem to show the beginning of that late Spring/early Summer pattern.

  • Most important number of the day: Gasoline demand. I can overlook a temporary surge in imports (I honestly don't believe we get one) and another build in crude stocks but we simply can't work through inventories without more demand. Gasoline production needs to rise as well to get prices down (now up 27% from the beginning of the year and apparently cutting into demand again). Gasoline demand must get back over 9 mm barrels per day and preferably back north of 9.15 mm bpd to get back to normal. If it does not do this soon, the return to service of the refiners is likely to be muted resulting in a prolonged period of bloated crude inventory levels.

 


Overnight Mailbag: Would you mind laying out the math in which you compare utilization vs. imports in order to determine whether the draw is somewhat accurate?

I just do some quick back of the envelope algebra on the numbers to see if they make sense from a general ballpark standpoint.

  • For example, from time to time, you see something like down imports, rising refinery utilization/throughput and a big build in storage. Just not possible.
  • When I looked at yesterday's API numbers they look odd from a couple of standpoints.
    • Generally, imports don't rise that much from week to week. So that's a heads up that something is out of sorts with the numbers. But having such a large jump AND a draw in crude again is difficult to buy given the large builds of recent weeks with similar refinery utilization and softer imports.
    • The utilization and throughput numbers are a bit off in terms of X amount of utilization yields X amount of throughput crude demand but that's less of an issue as the numbers can be one or two weeks separated from each other, especially during times of rising and falling utilization around the maintenance season.
    • I'd trust a rally in refinery utilization more this time of year since that's what we expect to have happen than I would lumpy reporting of imports data (lots of storms in the Gulf limiting volumes and then causing them to play catch up the next week. 

 

Stuff We Care About Today:

Yesterday's reaction to HK's operations update: YAWN.

  • I think the focus on IPs in the shale plays has gotten out of hand.
  • The eastern flank of the play saw HK's fourth well come in at a lower IP with more condensate and less gas in the well. I think it's more important that finding and development costs here are most likely below $1 (that's a good thing when gas is trading around $3.50.
  • The last well was drilled in about half the time of the first wells in the play. That last well was only well #5 (that's doubly good as the same budget will get you more wells as time to drill and day rates are significantly below where they were at the time the budget was set in February).
  • They are seeing decline rates that are shallow than they expected and shallower than other shale plays
  • So yawn if you like, but the results are strong and the notes and comments for the update are archived on the reports tab.

WRES speaks at IPAA at 11:45 EST today

, interesting oily little company.

Earnings Watch:

NBR Reported 1Q09 Results; They're Optimistic A Bottom Is At Hand.

  • Revenue of $1.142 vs $1.2 B expected
  • EPS of $0.44 ($0.65 net of charges) vs $0.56 expected
  • Comments / Outlook:
    • Results were helped by international results (excluding Canada), by long term contracts for rigs in the States, and by lump sum payments for rig cancellations.
    • Their rig count decline is slowing and they see it stabilizing in the near future. 
    • While rig hours shows signs of stabilizing, day rates continue to fall, especially in the mid-continent and West and South Texas.
    • Canada continues to look weak
  • Nutshell: One of the cheaper names in the oil service group with a strong balance sheet. They have a lot of pieces of their earnings puzzle in motion right now and I'm ready to jump back to the long side just yet as I expect North America to present them with a longer than expected "winter of activity".
  • Conference Call: 11 am EST.

NE reports after the close

Names I care about announcing results tomorrow: (SU), (NFX), (DO), (SPWRA)

Odds & Ends

Analyst Watch:  Barclays cuts (HAL) and (BJS) to Equal Weight, Nataxis trims (HK) target from $30 to $28. (RRC) upped to Buy at SunTrust, (PETD) and (SM) cut to Neutral at SunTrust, (NBR) cut to Hold at Deutshce, Citi upped (FSLR) target from $130 to $150.

95 Responses to “Wednesday – Oil Inventory Preview Plus”

  1. 1
    Sambone Says:

    By Lananh Nguyen
    Of DOW JONES NEWSWIRES

    LONDON (Dow Jones)–Crude oil futures held steady Wednesday in London as the
    market awaited the release of key U.S. supply data at 1430 GMT.
    “All eyes will definitely be on the Energy Information Administration stats
    and in case of a larger-than-expected crude supply builds the chances of
    another [price] drop could be heightened considerably,” oil brokers at ODL
    Securities in London said.
    At 1122 GMT, the front-month June Brent contract on London’s ICE futures
    exchange was up $0.05 at $49.87 a barrel.
    The front-month June contract on the New York Mercantile Exchange was trading
    $0.01 higher at $48.56 a barrel.
    The ICE’s gasoil contract for May delivery was up $1.75 at $430.75 a metric
    ton, while Nymex gasoline for May delivery was down 49 points at 140.95 cents a
    gallon.
    The oil market was largely neutral in anticipation of the U.S. inventory
    snapshot, giving back some earlier gains when traders covered short positions.
    “In the absence of any major macro numbers out of the U.S…the EIA data out
    later on Wednesday should provide short-term direction for prices,” said Edward
    Meir, an analyst at MF Global in New York.
    Analysts surveyed by Dow Jones Newswires forecast crude oil inventories in the
    week to April 17 rose by a hefty 2.5 million barrels, while gasoline stocks
    were expected to decline by 300,000 barrels. Distillate inventories were also
    seen 600,000 barrels lower.
    “Expectations of sharply higher oil inventories reflect ongoing concerns about
    the impact of unusually large refinery shut-ins that are currently taking place
    due to maintenance and economics shut-ins due to poor refining margins,” said
    Eugen Weinberg, an analyst at Commerzbank in Frankfurt.
    Crude inventories will be closely watched, particularly after the American
    Petroleum Institute industry group released data late Tuesday showing a
    surprise 1-million-barrel decline in U.S. supplies.
    The oil market has been buoyed in recent weeks by optimism in the equity
    markets, as oil traders shrugged off a backdrop of swelling oil inventories and
    sluggish demand. But fears over the global economic slowdown and its effect on
    oil consumption reemerged Monday, when weaker equities and a strong dollar
    dragged oil prices nearly 10% lower.
    Participants won’t be able to ignore weak fundamentals for much longer, said
    Stephen Schork, editor of the Schork Report, an energy market newsletter.
    “Bullish sentiment in the S&P index should cushion any big shocks in the next
    couple of DOE [U.S. oil inventory] reports, but we can’t expect this honeymoon
    to hold through May,” he said.
    Separately, Asia’s top three oil importers – Japan, China and South Korea –
    each posted steep drops in crude imports in March, a month when oil prices were
    on average nearly 50% lower on-year.
    -By Lananh Nguyen, Dow Jones Newswires (Yee Kai Pin in Singapore contributed to this report.)

    Dow Jones Newswires
    04-22-09 0735ET

  2. 2
    zman Says:

    On the HAL downgrade at Barclays, Barclay’s cited “sharply reduced earnings prospects … with low levels of rig activity in North America likely to persist into 2010…(Haliburton’s) earnings are expected to be under greater pressure than we had earlier presumed”… he then cut his 2009 EPS forecast 13% to $1.28 (Street is now at $1.31).

    He also whacked his BJS forecast by 25% to $0.75 (Street now at $0.67)

    It sounds like he was a bit slow on the earnings reduction cycle.

  3. 3
    zman Says:

    Re that last point in #1: It was reported earlier that China had one of their biggest months in history for imports in March…not sure where the reporter are getting the “steep drop” comment for them.

  4. 4
    jat Says:

    Z, thanks for the discussion re: API. I understand the imports / utilization tug of war; I guess my question is what X of utilization is equivalent to what X of demand?

  5. 5
    sane Says:


    Freddie Mac Chief David Kellerman Commits Suicide

  6. 6
    rseidman Says:

    UPDATE 2-Mexico oil output falls 7.8 pct in first quarter

    http://uk.reuters.com/article/oilRpt/idUKN2148560120090421?sp=true

  7. 7
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude futures traded lower Wednesday, as the impending
    weekly U.S. oil inventory data drew focus back to the growing supply glut.
    Light, sweet crude for June delivery traded 41 cents, or 0.8%, lower at $48.14
    a barrel on the New York Mercantile Exchange. The May contract expired Tuesday
    at $46.51 a barrel. June Brent crude on the ICE futures exchange traded 40
    cents, or 0.8%, lower at $49.42 a barrel.
    Oil inventories have risen for six-straight weeks, as refiners cut back on
    fuel production due to weak demand. In a Dow Jones survey, analysts gave an
    average forecast for a 2.5 million-barrel increase in data covering last week,
    due out from the U.S. Energy Information Administration later Wednesday.
    Those forecasts look shakier after the American Petroleum Institute on Tuesday
    reported a 1 million-barrel draw on crude stockpiles. A small draw would likely
    provide a slight boost to oil prices, potentially signaling that supplies are
    leveling off, while still leaving inventories close to their highest level
    since 1990.
    “If today’s … report were to provide a surprise confirmation of the
    drawdown, then crude futures could rally back above $50,” wrote Addison
    Armstrong, an analyst with Tradition Energy in Stamford, Conn.
    Crude futures had traded above $50 a barrel as recently as Friday, but have
    struggled since then as investors worry that the global economic downturn could
    continue to deepen. But the relative stability in oil prices, which have
    remained close to $50 a barrel for most of the last month, is sapping activity
    from the market, further reducing the odds of a big rally after the inventory
    data.
    “We are losing volume big time,” said Dean Hazelcorn, a trader with Coquest
    Inc. in Dallas. “That will take any momentum off the table.”
    Front-month May reformulated gasoline blendstock, or RBOB, recently traded
    down 2.13 cents, or 1.5%, at $1.3931 a gallon. May heating oil traded 1.70
    cents, or 1.3%, lower at $1.3308 a gallon.
    Analysts gave an average forecast of a 300,000-barrel decline in gasoline
    stocks and a 600,000-barrel drop in distillate inventories, including heating
    oil and diesel. The API reported a 100,000-barrel increase in gasoline stocks
    and a 500,000-barrel build in distillate inventories.

    -By Brian Baskin, Dow Jones Newswires
    Dow Jones Newswires
    04-22-09 0916ET

  8. 8
    zman Says:

    Jat: 1% of utilization change generally translates into 175,000 to 200,000 bopd of crude throughput.

  9. 9
    elduque Says:

    BDI +72 1869

  10. 10
    zman Says:

    Thanks RS – I will get the 10KP tab updated today. Only long 3 option positions at present as we seem to be at a cross roads on the groups and its earnings season and it pays to wait these days in E&P.

    Also, I don’t buy the whole, “buy the oil service names now as an investment that will pay off in 2 to 3 years” thing. So what if earnings are down in 2009 and down again in 2010. I think this rally is a head fake. If you are buying the stocks then I agree they will be higher in 2 years but I also think this is not part of that eventual move, that more bad news will supersede the moves we have seen (in which there has been no good news at all and in fact more warnings that continued declines are on the way but that cost cutting may mitigate some of the declines –note– that’s mitigate, not offset, some of the declines in margins). Oh gee, load me up.

  11. 11
    zman Says:

    TXCO sliding higher on all the Eagle Ford shale chatter of the last few days.

    NG up a penny plus. 8 more days until we get a look at the Feb 2009 production numbers, should see more roll in Texas, OK, other states, Wyoming. Probably see a slight rise in Gulf of Mexico that does not completely offset another sequential month of production drop.

  12. 12
    john11 Says:

    Good reaction to GMXR presentation yesterday.

  13. 13
    zman Says:

    Agreed, very strong reaction. Nothing in the presentation was really new relative to their PR but it seems to have turned the stock on. I think the monetization of assets and liquidity talk through 2010 helped.

  14. 14
    zman Says:

    HK – completely neglected yesterday, looks to be close to changing, not adding until at least after gas inventories tomorrow.

  15. 15
    john11 Says:

    Re GMXR the 20% of float short certainly a factor also.

  16. 16
    zman Says:

    Same goes for GDP, I’ll put together a list of short interest in several of our names for tomorrow. I think it will come into play soon as redeterminations get crossed off the list and commodity prices “bottom”

  17. 17
    choices Says:

    Z-#3-From what I read, I agree-attached article reinforces idea that China demand can only grow-this deal with Russia, plus reported deal with Kazakhstan entity-the Chinese are shopping. One official was quoted as saying they are not making any outright acquisitions during this economic crisis but they are certainly going after more supply.

    http://www.google.com/hostednews/afp/article/ALeqM5gfT2EjfJtu30nHSk1L6uKdmyaKQw

  18. 18
    zman Says:

    PXD – popped up more yesterday, leveraged but always cheap name, oil pop will help them much. Solid if overly conservative (at this juncture) management. Eagle Ford well drilling far east, slightly north of current activity, big position if they make it work over there.

  19. 19
    BirdsofpreyRcool Says:

    I don’t usually post this… but, I think it’s worth reviewing yesterday’s trading action as there was a very significant reversal that took place (read comments about the bears). I don’t mean a “technical” reversal… more of an insight into the current market psychology. Head Trader admitted he was “dead wrong” yesterday morning. I haven’t seen that happen in a long time (not that he always gets it “right”… but “dead wrong” is pretty rare).

    YESTERDAY’S TRADING

    · SP500 up ~2% on the day; Explosive rally into the close led by financials (up 6%), industrials (up 2%), discretionary (2%), and tech (up 1.7% although semis are notable laggards today); health care off 0.8% and only major group in the red; credit lagging today (IG flat and HY dwn) fresh shorts from yesterday being forced to turn around and cover; bears became a bit too eager to press shorts Mon into the bell (esp. in financials on back of BAC report) on the 840 cash break but price action & newsflow overnight/this morning wouldn’t cooperate w/a downside scenario; the break today up through 850 on sp500 and 10.50 on XLF prompted a lot of shorts to throw in the towel. Slew of earnings releases on the tape and on the whole numbers are coming in better than expected (esp. in the banks). Some of the best performing stocks in the sp500 all coming on back of earnings (USB, COH, STT, CMA, WU, AKS all making double digit % moves). Those 4 key buckets of positive news continues to be a tailwind for this market: 1) improved corporate trends (pretty much across the board so far this earnings season); 2) substantial gov’t action – there are media reports on Reuters that the Treasury is considering offering billions of fresh incentives to banks to modify mortgages, inc. giving aid to large owners of HELOCs (i.e. banks) and BLK’s Larry Fink was very bullish on the PPIP during his earnings call today. Also – there were a ton of headlines today around a German bad bank and talk about the ECB starting more “unconventional” policies @ its May 7 meeting ; 3) M&A (it started in health care and now appears to have spread in tech – yesterday ORCL/JAVA and this morning BRCM/ELX….BRCM’s offer is a hostile one and the company says it will look at other targets if ELX falls through…..the Journal says talks btw MSFT & YHOO are heating up); 4) pos. eco headlines (there wasn’t anything in the US but Germany’s ZEW came in better and German chancellor Merckel says she thinks the economy could be bottoming).

    · Commercial real estate updates – S&P says the Mar CRE delinquency rate increased by 28bp to 1.85% and is rapidly approaching Dec ’03 peak of 1.96%; Moody’s put out a review earlier in the day and said CRE deteriorated across the board in Q4 (led by hotels).

    · Treasury is weighing new mortgage modification incentives according to a Reuters report…..”Under one scenario, investors in second liens would receive a cash payment if they agree to ease the terms of troubled loans and accept a smaller return on their mortgage investment” (this is a pos. for the banks, many of which own more second lien paper)

    · Geithner testified this morning before a Congressional committee and helped sooth a lot of the market’s concerns over stress tests and bank capitalization – the Treasury Sec said the vast majority of the nation’s banks have enough capital. On the tests, a lot of the worries yesterday (inc. the fear that banks would “fail” the stress tests) were dispelled (Geithner reiterating a lot of what has been talked about previously: banks won’t “fail” the tests but may need more capital and if that is the case, Treasury will make that capital available).

    · Jobs – the next labor report isn’t until Fri May 8 (which is the second Friday in May), but there were some encouraging signs today. MAN shrs are rallying 15%+ after earnings today (according to MAN’s press release: “In the U.S. and French markets, we have experienced revenue stability over the last five weeks, which is the longest string of revenue stability in the U.S. in four quarters. The European geography, in general, has declined and continued to do so throughout the first quarter”). Also on the labor front, a Watson Wyatt Worldwide labor survey reveals companies are paring back their job cut plans.

  20. 20
    BirdsofpreyRcool Says:

    wow. US Feb Home Prices rose 0.7% MoM. Was expecting -0.7%. Mrkt likes this… a lot.

  21. 21
    BirdsofpreyRcool Says:

    Banks, jobs, home prices, home sales. The 4 Horsemen of the Market… in order. Need to watch these data more than anything else…. until something else becomes “more important.”

  22. 22
    Sambone Says:

    By Steve Gelsi

    Energy stocks were mixed Wednesday as Wall Street sifted through analyst
    rating changes and the latest update on petroleum inventories.

    Deutsche Bank downgraded Nabors Industries Ltd. (NBR) to hold from buy after
    the drilling firm said net income fell by about half, the latest in a series of
    big earnings drops in the oil service sector. However, its shares are currently
    up 4% to $15.17.
    After the closing bell on Tuesday, Nabors said first-quarter net income fell
    by about half to $125 million, or 44 cents a share, down from $212 million, or
    74 cents a share, a year ago.

    Adjusted to exclude write-downs and one-time items, the Hamilton,
    Bermuda-based company had earnings from ongoing operations of $184.4 million,
    or 65 cents a share.

    Revenue for the three months ended March 31 fell to $1.14 billion from $1.32
    billion a year ago.

    Analysts polled by FactSet Research had forecast the company would earn 59
    cents a share on $1.25 billion in revenue.

    Barclays also cut its ratings on Halliburton Co. (HAL) and BJ Services Co.
    (BJS) to equal weight from overweight. Halliburton shares are down 0.6% to
    $12.85 while BJ Services’ are up 1 cent at $13.27.

    Oil prices recently fell 47 cents to $48.08 ahead of the weekly update on U.S.
    petroleum storage data due out after 10:30 a.m. EDT.

    Against this backdrop, the Amex Oil Index of major oil producers and refiners
    fell 0.3% to 846.

    Shares of leading component Exxon Mobil (XOM) fell 1.3% to $65.38 while
    Chevron (CVX) fell 1% to $64.36. Both oil majors are components of the Dow
    Jones Industrial Average, currently up 20 points to 7989.
    The Amex Natural Gas Index retreated 1% to 372. The Philadelphia Oil Service
    Index fell 0.8% to 146.

    In one hopeful sign, however, Plains Exploration & Production Co. (PXP)
    increased the size of a fresh stock offering by 2 million shares to 12 million
    shares. The issue priced at $18.70 a share, raising $224 million. Shares of
    Plains fell 8.7% to $18.36.

    The success of the offering led analysts at Houston-based research firm Tudor
    Pickering Holt to suggest that recent gains by in the sector “has made equity a
    viable financing option.”

    -Steve Gelsi
    Dow Jones Newswires
    04-22-09 1018ET

  23. 23
    zman Says:

    Some of the smaller energy names moving but for the most part producers are on hold awaiting inventories.

    Oil service: up again. Wow.

  24. 24
    bill Says:

    z what do you think of the numbers

  25. 25
    zman Says:

    Crude: up 3.9 mm bls
    Gasoline: up 0.8 mm bls
    Distillates up 2.7 mm bls

    Utilization jumped to 83.4%
    Imports were high at 9.9 mm bopd

    Numbers look odd given the jump in crude inputs relative to imports. Thought is we are a week out of sync on these two.

    Cushing: inched up to 29.5 mm barrels from 29.2 last week.

    Gasoline demand rose to 9.136 (almost got my level from the post), still pretty weak for this time of year.

    Not an overtly bearish report, but definitely not bullish. The rally in utilization confirms API’s showing a turn in the refinery activity.

  26. 26
    zman Says:

    Add to 25, if you have a trucking stock you like, its increasingly apparent that they are going to enjoy some very cheap pricing this summer, cheaper than gasoline. Distillate demand in rotten, whether that be domestic or for export is hard to say. But we are more than bloated on distillate stocks at this point. It also confirms that stuff is not being shipped about from plant to retail site.

  27. 27
    zman Says:

    So far, crude is taking its cue from:

    1) the equity markets
    2) the increase in refinery demand.

    If you hold refinery demand at this level next week (or rally it a bit which is likely) and back off the crude imports (as is likely as they are lumpy and there have been more port shut ins in Mexico this week) you are likely to see a sizable drop in crude inventories which is likely to support a move back into the low to mid $50s.

  28. 28
    elduque Says:

    Z- Do you have any thoughts with regards to where you think GMXR should be priced in todays market.

  29. 29
    zman Says:

    Eld – mid teens. If they have no liquidity crisis, which it appears they don’t. If you just look at proved reserves (465 Bcfe at year end) and forget about their potential reserves, their current TEV of about $440 mm puts them under a $/Mcfe. Should be close to $1.25 to $1.50. Then you look at cash flow growth and their claim that production will double with the completion of the next five wells (said that yesterday and in the pr) then you are looking at free cash flow generation and even less of crunch. They have long live reserves which would normally command a premium multiple but there’s been the fear of the balance sheet hanging over them that has beaten the P/CF multiple down to just over 3x ’09 and just over 2x ’10 CFPS. I think we see some multiple expansion once they get the redetermination done (another 2 weeks it sounds like) and once gas prices stabilize.

  30. 30
    elduque Says:

    Thank you

  31. 31
    nifkin Says:

    anyone on NBR call? hearing they are taking numbers up

  32. 32
    Sambone Says:

    By Brian Baskin
    Of DOW JONES NEWSWIRES

    NEW YORK (Dow Jones)–Crude oil futures dropped Wednesday as weak demand
    pushed more oil and fuel into storage.
    Light, sweet crude for June delivery traded 34 cents, or 0.7%, lower at $48.21
    a barrel on the New York Mercantile Exchange. May crude expired Tuesday at
    $46.51 a barrel. June Brent crude on the ICE futures exchange traded 54 cents
    lower at $49.28 a barrel.
    U.S. oil demand over the four weeks ended April 17 is at its lowest point in
    nearly 10 years, according to the Energy Information Administration. Unwanted
    oil continues to fill storage tanks, with inventories rising by 3.9 million
    barrels last week, a new 18-year high and the seventh increase in a row. The
    average analyst forecast was for a 2.5 million-barrel increase, according to a
    survey by Dow Jones Newswires.
    Oil prices saw only slight declines, however, as the market continues to take
    cues from equities and the dollar, which on Wednesday signaled optimism about
    the U.S. economy that contradicted the EIA data. The Dow Jones Industrial
    Average was recently up 0.6% at 8,018.
    “I don’t think the fundamentals are the key drivers in this market,” said
    Nauman Barakat, senior vice president at Macquarie Futures USA Inc. in New
    York. “The question is, what are some of these other factors doing, (such as)
    equity markets and precious metals.”
    Fuel inventories were also higher in the EIA data, including an 800,000-barrel
    increase in gasoline stocks and a 2.7 million-barrel jump in distillate
    inventories, including heating oil and diesel. Analysts had given average
    forecasts for a 300,000 barrel drop in gasoline stocks and a 600,000-barrel
    decline in distillate inventories.
    Refinery utilization rose by 3 percentage points to 83.4% of capacity, where
    analysts had expected a 0.7 percentage point gain.
    Front-month May reformulated gasoline blendstock, or RBOB, recently traded
    down 2.97 cents, or 2.1%, at $1.3847 a gallon. May heating oil traded 2.96
    cents, or 2.2%, lower at $1.3182 a gallon.

    -By Brian Baskin, Dow Jones Newswires
    Dow Jones Newswires
    04-22-09 1104ET

  33. 33
    zman Says:

    Had a family thing come up, missed first part of the call, will go back and read first half transcript.

  34. 34
    choices Says:

    Did not know they had oil off Mass-I remember Kennedy fought the wind mill farms off the coast-ie, “not in my backyard.”

    http://www.boston.com/news/politics/politicalintelligence/2009/04/kerry_kennedy_s.html?camp=localsearch:on:twit:pol

  35. 35
    zman Says:

    Oil up now, sticking with my comments in 27.

  36. 36
    zman Says:

    NBR saying costs are coming down and they have pricing power, I would not add puts in here, sounds like numbers are indeed going to be coming up. Analysts sound very bullish in the Q&A. Again, back to comment in the post, despite the run, it is one of the cheaper names in the group. Friday’s call with SLB will be interesting.

  37. 37
    zman Says:

    … in terms of tone setting for the OIH.

  38. 38
    zman Says:

    GMXR = wow.

    ROSE creeping up, will do full review there shortly.

    NBR call going very well, odds are it goes higher, pitching their higher priced units strategy well, strength in international market continues.

    NFX announces post close. I am on the bubble as to buy/don’t buy there. They will have more strong results from the Woodford and also some Bakken wells to talk about. Don’t think anything new on deepwater looking at their time lines. International same. Cheap stock, continues to perform well. Realizations in the mid-continent may cause a small miss however.

  39. 39
    zman Says:

    Killed the NBR call early to listen to WRES close out the IPAA presentations. If you have 10 minutes I highly recommend looking at the story. Think California oil done in a new way, clean, pre approved for a lot of wells. 17% production growth this year without drilling a new well. Also Rockies gas but small part of portfolio and nobody will get excited about CBM there now. Stock has run from a buck to $1.80 in last four days. Still quite cheap on reserves, cash flow, balance sheet in good shape.

  40. 40
    zman Says:

    Market seems to be desperately trying to hold onto the Geithner “positive news” which seems to come out every time we are at or around Dow 8,000. Seems fishy.

  41. 41
    zman Says:

    Tater or Nicky or anyone with TA thoughts on the SP500 would be appreciated in here.

  42. 42
    zman Says:

    Right here, right now watch:

    Take a look at the smallish block trades and telephone pole like, albeit small move in HK, that’s a fund taking or adding a position.

  43. 43
    zman Says:

    Geithner pump failing, just as HK taking off, volume indicates accumulation by a hedge or mutual fund.

  44. 44
    zman Says:

    TXCO = wow. Should have acted on that one. Good early call there Reef.

  45. 45
    BirdsofpreyRcool Says:

    The mrkt sold off b/c GM announced they wouldn’t make a June 1st coupon payment to bondholders? Ahhhh, jeeez. Like THAT was a surprise. They are either going to exchange those bonds or be in BK by that time. Funny mrkt. Someone figured it out, finally.

  46. 46
    zman Says:

    Homework list: ROSE, WRES, TXCO, KOG. Doing work on all for a big upside portfolio. Penny lovers delight, call it what you will.

  47. 47
    zman Says:

    Product Watch: Sennheiser wireless head phones get the office thumbs up. I listen to a lot of conference calls, have so far walked to the full 120 foot range with good clarity. Well worth the 70 bucks.

  48. 48
    zman Says:

    PQ is already in that penny lovers list along with END.

    GMXR and SD too but both will likely soon be double digits.

  49. 49
    BirdsofpreyRcool Says:

    How about “Kids on the Short Bus”?

  50. 50
    zman Says:

    NFX rising into their earnings call, missed some $30 strike May calls there earlier.

  51. 51
    zman Says:

    BOP – ha, think managements might take offense, lol.

  52. 52
    BirdsofpreyRcool Says:

    How about “The Red-Headed Midget Squad” then?

  53. 53
    BirdsofpreyRcool Says:

    I know, i know… the PC Police will shoot me dead in the middle of the street someday. My bad.

  54. 54
    zman Says:

    Single Digit Midget Squad it is. We’re slowly getting past the “I Will Survive” Phase and moving into the “Look, Mom, I’m Cheap But Not For A Reason Except That No One Likes My Group” Phase. 2010 hedges are becoming increasingly important.

  55. 55
    zman Says:

    53 – the PC police need to get real jobs. Maybe hanging solar panels.

  56. 56
    BirdsofpreyRcool Says:

    “I Will Survive” was obvious… but, what is the theme song of the SDM Squad?

  57. 57
    BirdsofpreyRcool Says:

    “What’s Love Got To Do With It” …??

  58. 58
    BirdsofpreyRcool Says:

    POTUS on TV, giving a history lesson on the US oil business…

  59. 59
    zman Says:

    How about “Every breath you take”?

    Obama speaking in Iowa about the first oil derrick with a gleam in his eye about U.S. innovation. Went by the local windmill shop over the weekend. Blades as far as the eye could see. Seems to be some project financing troubles mounting.

  60. 60
    BirdsofpreyRcool Says:

    “Hi Ho, Hi Ho, It’s Off to Work We Go!”… ??

  61. 61
    zman Says:

    BOP – PQ still a good value here. Nothing really new in their presentation at IPAA, just keeping on keeping on. Fayetteville growing nicely, Woodford at a standstill on rigs but makes sense given their HBP acreage, no rush at these prices.

  62. 62
    BirdsofpreyRcool Says:

    z — re PQ… agreed. Went back up to your list a sec ago, to see if you put PQ on it. You didn’t. But, agreed. You should.

  63. 63
    zman Says:

    Might add BEXP to that list, they’ve got issues of the “survive variety” but they probably squeak through. The banks are showing a lot of latitude this time around in working with people on their lines despite the persistent low prices. Part of that is the decrease in costs that is translating into better returns at lower prices. Should see that start to be reflected with the second quarter E&P results which means that they should be talking about on the conference call in coming days.

  64. 64
    zman Says:

    Had it in #48 with END

  65. 65
    BirdsofpreyRcool Says:

    PQ, oops. I really do read everything you post… really. Just skipped around a bit more than usual today. thx.

  66. 66
    zman Says:

    Management at END is good, very experienced, I knew them at Ocean before it was bought by APC. Took END awhile to get its sea legs in the North Sea but now that program is humming and they are redeploying that capital there but also back into the U.S. market which they had abandoned. They’ve made some smart asset deals as well recently completing a 6x return on the purchase of Norway assets in 2004 that they just sold the other day to help de-lever the the still levered balance sheet. I think they rally with a higher oil price and with a recovery in UK/ Europe economy, later this year. They are sitting on a half a Tcf of recently discovered natural gas so that will be a direct and low cost plug into the Eurozone.

  67. 67
    zman Says:

    re 66 – apologies for the stream of consciousness writing today, working up my thoughts on each of these little SDMS stories.

  68. 68
    zman Says:

    FSLR liking what Obama had to say about U.S. being a leader in renewables.

  69. 69
    zman Says:

    SPWRA in the solar space reports tomorrow.

  70. 70
    zman Says:

    Oil has officially given up on paying attention to this week’s numbers and is marking the equity market higher. Note products are lagging as nobody likes to see production rally along with imports to the point of exceeding demand. Distillates are extremely bloated. Should be a shot in the arm for consumer prices later this year as it gets cheaper to get goods from point A to point B.

  71. 71
    choices Says:

    PDS announced financing restructuring 4/20, conference call today on earnings, up over 13% today-did not hear conference call but mkt evidently liked what it heard.

  72. 72
    zman Says:

    Choices – I don’t track them closely. The tone of the service calls does not seem to be things are improving but that they expect things to level out. That seems to be enough to rally the stocks.

  73. 73
    choices Says:

    Looks like shorts being squeezed (again) in S & P-yesterday at the close, it was very obvious-strange market but that probably is not news.

  74. 74
    choices Says:

    Thanks, Z. I think the financing on PDS was the big news, will get out of the bridge loan at 17%, reduce interest costs on annual basis by $70 mil, prob Can $.

  75. 75
    zman Says:

    EOG looks like it might make the trip back to $60 now that oil has found a home again in the mid to upper $40s. Pressure came with the soft market on Friday which slammed the soon to be expiring May contract. Growth is only expected to be in the low single digits now so the bar is not set high. Potential for a small beat here on 1Q earnings as oil realizations may be a touch higher than expected.

  76. 76
    zman Says:

    HK and SWN also look poised to breakout to me again. I will not add more until after the gas storage number tomorrow. Estimates are calling for a 41 Bcf build which is just under the 5 year average for the week.

  77. 77
    RMD Says:

    Do you have current OGIP numbers for the HS and Cotton Valley? I saw a 6/08 number at ~230B per section for the HS and 20B for the CV with a 10% recovery factor.

  78. 78
    zman Says:

    I don’t think I have anything different on the CV, thinking hasn’t changed much there in a long time to my knowledge.

    On the Hyanesville, HK said 150 to 170 Bcf yesterday.

  79. 79
    zman Says:

    and for comparison:

    Eagle Ford 180 to 210 Bcfe per section
    Fayetteville 55 to 65 Bcfe per section

  80. 80
    zman Says:

    I’m not officially a TA guy but I play one on the internet. You might notice that HK kissed the 50 day moving average yesterday and bounced.

  81. 81
    tater Says:

    Market appears to have to go up. It is what it is. Apparently going to test the 875 mark from a couple days ago. It seems to have this necessity to it, like there won’t be any stock left to buy if you wait a month.
    Action like this makes me very skeptical. I understand the whole wall of worry thing. This looks to me like a concerted push to breakout levels to instigate a “come on in, the water’s fine” attitude from the market makers. In other words, it looks to me like market pumping in order to sell more at a higher price. Reminds me very much of Spring of ’08, but at least that time had the run-up in the oil sector. What’s the reason for me to be a believer today? Because things aren’t as bad as some analyst expected. Analysts don’t work for me. They work for big banks in NY.
    I don’t feel comforted and continue to add to shorts the further we rise.
    (Wow maybe I should watch the market more and type less, who pooped on the market?)

  82. 82
    zman Says:

    ZTRADE:

    Took a quarter of a position in common stock of GMXR at $9.61, will add more in a few days especially if it retreats after this minor breakout. Thinking 3 to 9 month hold, maybe longer. They should get their bank line squared in the next 2 weeks and should have completion news on their next 5 Haynesville wells which they said would double their production when they come on line.

  83. 83
    BirdsofpreyRcool Says:

    Primers Are Wonderful Things —

    Last week the US Department of Energy released a Shale Gas Primer. The Primer provides an overview of modern shale gas development, as well as a summary of federal, state, and local regulations applicable to the natural gas production industry, and describes environmental considerations related to shale gas development.

    Here is the link where you can access the report: http://fossil.energy.gov/programs/oilgas/publications/naturalgas_general/Shale_Gas_Primer_2009.pdf.

    Highlights:

    Page 8: Nice shale map of the US

    Page 25: Production estimates for Unconventional gas

    Page 33: Comparative Chart of all the Shale Plays (size, depth, thickness… etc)

    Page 34-40: Overview of all shale plays (Barnett, Fayetteville, Haynesville, Marcellus, Woodford, Antrim, New Albany

  84. 84
    zman Says:

    BOP – how do the TXCO bonds look?

  85. 85
    BirdsofpreyRcool Says:

    z — great question… lemme look.

  86. 86
    zman Says:

    Can’t take credit, was Reef’s idea.

  87. 87
    BirdsofpreyRcool Says:

    TXCO — hmmm…. must be all bank debt… can’t find any public or 144a bonds/notes on bloomberg. I’ll check their K.

  88. 88
    zman Says:

    Carter Worth on CNBC suggesting stocks have gone up too far too fast. Surprised they let him in front of a camera, bunch of perma bulls.

  89. 89
    zman Says:

    Decided to wait for the release and call on tomorrow’s list of stocks we care about. Came close on NFX but missed earlier. I’d like to hear what they say this quarter and then react. Only the service names can say the sky is falling and watch their stocks pop and I now see that the Citi analyst who thought we would see a ton of warnings from service (we saw exactly 0) are now all bargains and should rally further. No wonder people despise analysts.

  90. 90
    BirdsofpreyRcool Says:

    TXCO — bank debt can be traded too… but even harder to get quotes. Doesn’t mean you can’t… just takes a little more creativity.

  91. 91
    zman Says:

    Thanks BOP

    Beerthirty.

  92. 92
    mimster90 Says:

    Hi zman,
    Any thoughts on KWK now that BBEP has suspended their payouts?

  93. 93
    zman Says:

    Mimster – have not given it huge amounts of thought, will take a look and give a shot for the post in the morning.

  94. 94
    VTZ Says:

    Any comments on ECA earnings or comments about doubling spending in Haynesville?

  95. 95
    zman Says:

    RE ECA – people liked the results, I noted it was up during the day but am not a big follower there.

    Just went over the transcript re their plans in the Haynesville.

    Spending doubling to $580 mm, sounds like they borrowed some cash from another play, looks like they are adding acreage on the cheap, good call on their part. Aubrey mentioned yesterday how the play went from $1000 an acre to $30,000 over the course of a few months and had fallen substantially since, don’t know what leases are going for lately, hard heard some were very cheap in outlying areas recently

    JR can you give color on lease prices here now?

    Anyway, spending on 50 wells probably costs you $400 to $450 million leaving quite a bit left over for additional land and gathering. In the big scheme of things, if you are thinking wow, extra gas, this is 25 more wells so while it’s extra gas in 2009, its not that much gas, maybe you get an extra 0.1 Bcfgpd in aggregate out of those adds.

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